I Can’t Believe They Did This?! Signature Shutdown!

Last week the final remaining pro-crypto Bank in the United States was suddenly Shut down by Regulators this is despite The fact that it was apparently still Solvent this has led to speculation that It was targeted because of its Connections to the crypto industry the Recent acquisition of the bank's Non-crypto assets underscores this Possibility so today I'm going to tell You everything you need to know about Signature Bank including where it came From how it ended up in this position And what its collapse means for crypto Let's start with a bit of background Signature Bank was based in New York City and was founded in 2001 by Joseph De Paulo Scott Shea and John tamberlain The trio had Decades of experience Working in the banking sector Joseph was The CEO Scott was the chairman and John Was the vice chairman now Signature Bank Was very different from the other banks In NYC for starters signature catered to Small and medium-sized businesses in the Area which generally had a harder time Getting access to banking services These included taxi services real estate Companies and even former U.S president Donald Trump now obviously taking on Clients like these comes with its own Set of risks signature offset these Risks by doing extensive due diligence On their clients before taking them on

Board and only investing deposits in the Safest assets the result was that the Bank never had a year when it lost money Until recently Logically limiting your risk means you Also limit your rewards signature Increased its rewards by focusing on Ways to help its clients make money the More money its clients made the more Deposits they would keep at the bank the More deposits they kept at the bank the More the bank could invest Signatures simple strategy resulted in Its deposits growing from 50 million Dollars in 2001 to over 50 billion Dollars in 2019 a 100x increase It seems that signature's potential was Apparent to investors early on because The bank's stock listed on exchanges in Early 2004 less than three years after Its founding at the time of its collapse Signature Bank had around 100 billion Dollars in assets and was the second Largest lender to apartment landlords in New York City So given these facts you'd think that Signature would have been more of a Household name Well it seems the only reason why this Wasn't the case was its Founders when Researching signature we quickly Discovered that its Founders are Extremely and I mean extremely camera Shy

Case in point Joseph didn't even show up To claim a banking award in 2012 instead Sending someone in his place This seems to be because of the Philosophy of all three founders According to Bloomberg Joseph had a Simple office and frequently ate a Simple lunch alone at his desk this was Because he wanted to remind himself that He needed to earn his position every Single day and the work environment Itself was reportedly very horizontal no Task was seen as beneath the bank's Executives put simply signature bank's Founders were humble they didn't want to Be praised or even recognized the only Interviews I could find were with Scott And there were only two luckily in one Of these interviews Scott unpacks how And why signature started working with The crypto industry When the 2008 financial crisis occurred Scott realized it was ultimately a Crisis of trust when he heard about Bitcoin and how its goal was to Eliminate trust from the financial System he was intrigued when he saw that The crypto industry was underbanked he Knew this was a big opportunity not only That but Scott believes that the basis Of humanity itself is the ability to Exchange things freely and fairly He considers cryptocurrency to be the Pinnacle of free and fair Exchange in

The digital world He considers Central Bank digital Currencies or cbdcs to be the exact Opposite and therefore anti-human more About the differences between Cryptocurrency and cbdcs in the Description moving on Signature went on to provide banking Services for the biggest companies in The crypto industry as part of the Bank's strategy to help its clients make As much money as possible it developed Signet a platform which made it possible To transfer US Dollars 24 7 for its Crypto clients what's interesting is That Signet is a permissioned version of Ethereum now Scott explained in that Interview that Signet essentially Tokenizes the US Dollars its clients Have in their Accounts at signature this Made signet's tokenized US Dollars Different from regular stable coins like Circles usdc in three ways every Tokenized US Dollar on Signet was FDIC Insured because each tokenized dollar Corresponded to an actual Dollar in an FDIC insured bank account not U.S Government debt like most stable coins This meant that signatures tokenized US Dollars couldn't lose their Peg and There were also no transaction fees on Signet now if you watched our video About the collapse of silvergate Bank You'll know that the silvergate exchange

Network or sen offered essentially the Same 24 7 Services as Signet the Difference was that the sen wasn't Blockchain based the sen also launched In early 2018 where a Signet launched in Early 2019. The one-year delay didn't stop Signet From becoming popular though by 2020 Almost 1 000 of signatures clients were Using the network Signet processed around 400 billion Dollars of transactions in 2021 roughly Half of the 800 billion dollars in Transactions that the sen processed During that same period At that time around 30 percent of Signatures total deposits of roughly 100 Billion dollars came from its crypto Clients by contrast almost 100 of Silvergate's total deposits of roughly 14 billion dollars came from its crypto Clients and as two of the few Pro crypto Banks there was lots of overlap in their Client base the difference was that Signature only held cash on behalf of Crypto clients whereas silvergate held Both cash and crypto silvergate also Allowed its clients to use crypto as Collateral for loans something that Signature was eventually planning on Offering like silvergate signature Started having issues after FTX and Alameda research collapsed last November Silvergate was much worse off however

Because almost 10 percent of its total Deposits came from FTX signature was Initially much better off because only 0.1 percent of its total deposits were Of FTX origin however these subsequent Scrutiny of silvergate seems to have Spooked signature because in November it Announced that it would be reducing its Crypto-related deposits by 10 billion Dollars this accounted for almost 50 Percent of the bank's crypto related Deposits and more than 10 of its total Deposits unfortunately this didn't stop Signature from being downgraded by two Wall Street firms less than a week later And by a third in early January they Must have heard that the bank had Borrowed 10 billion from the federal Home loan system presumably to honor Panicked client withdrawals the Federal Reserve OCC and FDIC also issued a Warning to Banks working with the crypto Industry in early January it seems that Signature's response to this warning was To limit binance's access to USD Accounts in late January come February Binance had indefinitely suspended USD Transfers but that wasn't enough in February signature was hit by a lawsuit Alleging that it had knowingly Facilitated the commingling of FTX Customer funds on Signet less than two Weeks later Joseph announced he would be Stepping down as CEO something which had

Reportedly been in the works for some Time hmm Then in early March silvergate shut down The sen and closed up shop shortly Afterwards this caused the largest Crypto companies in the United States to Switch to Signature one of the only Exceptions was Kraken which didn't like That the bank had escalated to Restricting USD transfers for all Exchanges not surprisingly silvergate's Bankruptcy led to concerns that Signature was the next crypto Bank Domino to fall these concerns were Amplified by the collapse of Silicon Valley Bank or svb on Friday the 10th of March something that we covered at Length in another video that will be Down in the description If you've already seen that video you'll Know that the fed the treasury Department and the FDIC bailed out svb Depositors on Sunday the 12th of March This was expected what was not expected However was that the New York Department Of Financial Services or nydfs would Shut down Signature Bank a few hours Later This move caught the crypto industry off Guard and it created huge issues for the Crypto companies which had just jumped Ship from silvergate shortly after it Was taken down coinbase and paxos Confirmed that they had hundreds of

Millions of dollars of assets and Reserves stuck at signature meanwhile Usdc issue a circle had to scramble to Find an alternative to Signet so that it Could process the billions of dollars of Stablecoin redemptions that had piled up Over the weekend due to usdc's debegging The d-peg was in part caused by the Recent sin shutdown but other factors Were also involved Regardless Signature Bank board member Barney Frank cried fell after the Closure he claimed that the bank was Still solvent as it had access to the New credit facility that the FED had set Up he insisted that quote Regulators wanted to send a very strong Anti-crypto message by shutting down the Bank and if his name sounds familiar It's because Barney was one of the People who wrote the infamous Dodd-Frank Act which was passed in the aftermath of The 2008 financial crisis Barney later lobbied to change the law In 2018 and the recent banking crisis Has many calling for those changes to be Reversed in any case the nydfs later Told the press that it had shut down Signature Bank because it quote failed To provide consistent and reliable data Nobody was buying it especially after it Was reported that FDIC officials were Surprised that they were instructed to Acquire Signature Bank at the last

Minute The speculation that this was a not so Subtle crypto hit job exploded when Reuters reported that the FDIC would Block prospective buyers of signature Banks assets from acquiring its crypto Related assets naturally the FDIC denied These reports and insisted that the Takedown had nothing to do with crypto Lo and behold the FDIC sold signature Banks assets to Flagstar Bank earlier This week crypto assets not included This directly contradicts the fdic's Claims that the takedown wasn't crypto Related and has been taken as concrete Evidence that the operation to cut Crypto out of the banking system is very Real This begs the question of why Regulators Specifically targeted signature after All there were many other Banks offering Services to crypto companies including The likes of JP Morgan and bny Mellon Well the answer is that signature was Likely targeted by Regulators because of Its revolutionary Signet platform this Is something that I speculated on in our Aforementioned video about silvergate to Refresh your memory silvergate was Likely shut down because the sen was Seen as a direct competitor to the fed's Upcoming fed now payment system which Will provide 24 7 US dollar transfers Including payments while the sen was

Limited to silvergate's crypto clients And uses the bank was working on turning The network into a 24 7 payment system To that end silvergate had acquired Facebook's failed digital currency Project Libra AKA DM and was going to Use the tech to roll out its own payment Stablecoin Although Signature Bank wasn't Explicitly planning on turning Signet Into a payment Network the potential was There and Scott implied in his interview That it was on the roadmap Scott also Dodged a question about whether the Fed Was comfortable with Signet given that It was analogous to a digital dollar Now to be fair this could just be Circumstantial evidence I'm also sure That it's just a coincidence that the FED announced just a few days after Signature Bank was shut down that fed Now will be launching in July I mean It's not like the FED doesn't want any Competition from the private sector or Anything In all seriousness custodia bank's CEO Caitlin Long provided more concrete Evidence of this possibility in a recent Blockworks interview with Castle Island Ventures partner Nick Carter she Explained that custodia was likely Blocked from getting an account at the FED because of a patent the bank had The patent in question related to the

Tokenization of Bank deposits which is Literally what cbdcs are tokenized Bank Deposits Caitlin also revealed that custodia was Working on developing a digital dollar Of its own and that fed officials had Made it clear to her that they did not Like that one bit And another reason why Signature Bank Could have been singled out is because Of its role in New York City real estate Recall that the bank was the second Largest issuer of loans to apartment Landlords in NYC now consider that real Estate taxes make up more than a third Of the city's Revenue the largest single Chunk it's possible that Regulators Wanted a bigger Bank to take over Signatures real estate portfolio before Small and medium-sized Banks start going Under as some of you will know the Recent banking crisis is causing Deposits to flow from smaller Banks to Bigger Banks which are of course too big To fail this means that small and Medium-sized banks will need to sell Assets from their balance sheets to Honor customer withdrawals The problem is that these small and Medium-sized Banks can't always sell These assets for the same price they Bought them for particularly if they're Sensitive to interest rate increases Well real estate is very sensitive to

Interest rates and Commercial Real Estate has recently been getting hit Hard It just so happens that 80 of commercial Real estate loans come from Banks like Signature if deposit outflows continue This could cause huge issues for Commercial real estate markets now I Reckon that The Regulators don't care That much about commercial real estate Markets in rural areas but you can bet Your bottom dollar that they care a lot About the commercial real estate market In NYC Taking down Signature Bank could have Killed two birds with one stone crypto And real estate risks so this brings me To the big question and that's what Signature Banks take down could mean for The crypto Market Well in short it suggests that Regulators in the United States are Intent on cutting the crypto industry Out of the banking system and taking Down any technologies that compete with The FED if you watched our video about The Man Behind operation choke point 2 You'll note that the FED has one final Crypto competitor to crush and that's Stable coins which are de facto digital Dollars as I've said many times before The stablecoin Crackdown will likely Come from the SEC starting with paxos The good news is that this stablecoin

Crackdown if it does come will be Contained to the United States as much As it would suck for usdp or usdc to be Taken down the harsh reality is that Neither of these two stable coins is Critical for the functioning of the Crypto Market at least not nearly as Much as usdt this is because usdp and Usdc aren't really used for trading However they are used for defy now the Takedown of usdp or usdc could do Serious damage to defy and the Cryptocurrencies that support the two Stable coins such as ethereum this gives U.S Regulators an additional incentive Defy is another competitor now for what It's worth paxos and circle offer other Services and stable coins which should Be safe from regulatory scrutiny it's Likely that they will pivot to providing These services and stable coins in other Jurisdictions as many other crypto Companies are now reportedly considering Including coinbase The bad news is that not all these other Jurisdictions are crypto friendly and Some are becoming less crypto friendly By the day If you watched our recent weekly crypto Review it looks like the UK is starting To crack down on crypto banking too and It's possible that other allies like the EU will soon follow suit besides the Fact that the EU has likewise been

Increasing the scrutiny of crypto's Relationship to the banking sector EU Politicians will be casting their final Votes for the eu's crypto regulations in Late April Some EU politicians want changes to the Legislation as it was written prior to The collapse of FTX this means that There is a slim possibility that the Eu's finalized crypto regulations won't Be nearly as pro-crypto as they once Were we could see the same thing happen To the UK's pro-crypto regulations if This current Trend continues It's also possible that the Crackdown Will go Global come the summer that's Because the financial stability board or FSB will be announcing its Global crypto Regulation recommendations around that Time if you watched our recent video About the FSB you'll know that it is Effectively an arm of the US government This means its crypto regulation Recommendations could be very bad The Silver Lining is that not all Countries will follow the fsb's lead Namely those in the Middle East Asia and Possibly even Africa and Latin America Crypto adoption is growing fast in all Of these regions and there's lots of Speculation that the next crypto Bull Run will come from the so-called Global South Once there's regulatory Clarity in the

United States around cryptocurrency Stablecoin issuers exchanges and other Key players in the crypto industry will Be able to resume semi-regular Operations This will likely come in the next year Or two and it will make the crypto Bull Run that much bigger gosh it's times Like this that I wish I had a time Machine but then again it's all about The journey not the destination right Guys Anyway thank you all so much for Watching and I will see you in the next One [Music]